February, 2024

Issue #4

Edito
Major European banks are becoming predictable. In February, Barclays caught up with its
peers on climate commitments by excluding direct support for new oil and gas fields. The
biggest provider of fossil fuel financing in Europe since the Paris Agreement is the fourth to
make such an announcement in the past six months. In total, a dozen major banking groups
have aligned with this new standard. However, it is safe to say that a policy that only covers
5% of financial services to the fossil sector (i.e., project financing) effectively means
business as usual for Barclays and its peers.
Barclays’ policy features the exclusion of midstream infrastructure related to newhydrocarbon fields, but it is unclear whether this includes new liquefied natural gas (LNG)
terminals. Even if it does, that will not be much to celebrate. As the January issue of thisnewsletter highlighted, these misleading announcements that banks like to copy off of eachother are full of loopholes. The announcement might sound good, but is unlikely to prevent
Barclays from profiting from the climate-wreaking LNG boom.
Barclays also joins the lineup of banks tying future financial support to the adoption oftransition plans by their clients. But like other banks, Barclays is not asking oil and gas
companies for a guaranteed reduction in real-world greenhouse gas emissions. Simply
requiring clients to pledge to cut scope 1 and 2 emissions or showing willingness to tackle
methane reduction is simply not enough. A company planning to bring new oil and gas
resources into production simply cannot claim to be in a transition. Yet, the red line
outlawing expansion is never drawn in oil and gas policies.
In a sense, the announcement made by the Dutch investor, PFZW, the 10th largest
European pension fund, does acknowledge this scientific necessity. The pension fund isdivesting US$2.8 billion worth of oil and gas company shares and bonds. After years offruitless engagement, the Dutch investor lost faith in the ability of heavyweights like
TotalEnergies, Shell, and BP to align with climate science. We call on other investors andbanks to also face the facts and take action accordingly.

Noam-Pierre Werlé, Policy Analyst at Reclaim FinanceNew policies & updates

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928+5 updates:+1 update:
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Barclays
BPCE/Natixis
PFZW
Groupama AM
Lloyds Banking
groupsustainable power
targets

Focus on sector policies and transition plans
A growing number of financial institutions are demanding transition plans from their clients.
In the absence of a regulatory framework requiring adherence to minimum criteria, thistrend primarily amounts to greenwashing, risking the long-term credibility of what is an
essential approach to ecological planning.
What should be expected from a transition plan?
Adopting a transition plan is imperative to guide a gradual exit from fossil fuels. However, it
is crucial that such a plan truly deserves its name and includes elements to guide thetransformation of business models towards alignment with a 1.5°C pathway. After analyzing
26 public methodological frameworks related to the design and evaluation of transition
plans, Reclaim Finance has identified the essential indicators to guarantee that these plans
are credible.
To be considered robust, a transition plan must include absolute emission reduction targets,a decarbonization strategy, an engagement strategy, reporting and governance, aconsideration of biodiversity, and a just transition. But some red lines must also berespected. Failure to adhere to them is enough to disqualify a plan, and also to indicate thatthe company cannot be considered to be in transition. Obviously, one of these red lines forthe energy sector is the continued expansion of fossil fuels.
How do financial institutions currently use transition plans?
However, these basic elements are not included in the majority of frameworks adopted byfinancial institutions to analyze their clients' transition plans. Financial institutions’requirements are sometimes far too weak to ensure any semblance of credibility for these"plans." That is the case with Barclays. The bank lists several criteria, some of which arerelevant, but there are very few minimum requirements to remain a client and those thatexist are far too vague and insignificant to show a genuine transformation of their businessmodels.
When oil and gas expansion plans are assessed, as is the case with Barclays and HSBC,
new fossil fuel projects do not automatically trigger the exclusion of the company. In mostexisting policies referring to transition plans, as is the case with AXA’s policy, this sciencebased red line is not even mentioned. Other financial institutions, like CaixaBank, NatWestor UBS, are weaker still, using the adoption of a transition plan as justification for not
implementing exclusion measures. To top it off, they fail to specify the minimum criteria tobe met to be considered as having a transition plan.

Find out more

Latest news
A financing ratio to monitor theenergy transition.
The climate crisis requires acting on two parallelfronts. Fossil fuels must be phased out, andsustainable energy sources massively phased in toreplace them. Banks have a role to play in thisprocess: for each dollar going to fossil fuels, theymust allocate six dollars to sustainable power
supply. Read more

MACSF: another life insurer takes astand against LNG expansion.
The healthcare professionals’ life insurance
provider has become the second French life insurer
to restrict new investments in companies
expanding oil and gas, including pipelines and LNG
terminals. The biggest French banking andinsurance groups must urgently follow this path.
Read more

A third way to conciliate engagement
and sanctions?
Halfway between lax engagement, sometimes asynonym for complicity, and total divestment,
Reclaim Finance is proposing a third path forinvestors to follow: stop purchasing new bonds
from companies failing to show any willingness totransition, while using shareholding as a means tosanction them. Read more

Resources

DiscoverDiscoverDiscoverTake action!
Find out more about our recommendations for financial institutions to adopt robust fossil fuelpolicies.

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